Peso may fall past P50:$1 by March – FMIC-UA&P

A private think tank said the expected weakening of the Philippine peso past the P50:$1 level may occur before the end of the first quarter, much earlier than the end of the year, forecast previously by another group of private financial analysts.

First Metro Investments Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said their joint study considered pressures on the Philippine currency from the impending Federal Reserve interest rate hikes in the US.

“While there may be periods of peso appreciation, the overall trend of a depreciation will likely continue in 2017, albeit at a slower pace than 2016,” FMIC and UA&P said in the latest joint issue of The Market Call.

“We think that the US/PHP rate will remain under pressure… especially now that the Fed has set the stage for more hikes in 2017,” it added.

Given this, the think tank said the peso-dollar rate may drop from P49.99:$1 in January to P50.18:$1 in February, before further weakening to P50.49:$1 in March.

The report recalled that the peso took a further beating after the US Fed raised interest rate by 25 basis points on December 14 last year.

Expectations for three rate hikes in 2017, based on indications made by US Fed chair Janet Yellen in a speech last month, added further weakness to the Philippine currency.

The peso closed at P49.72 against the greenback at the end of last year. For the entire 2016, the peso depreciated by 5.35 percent from the year earlier.

The currencies of emerging markets, still dampened by fund outflows amid the rate hike and possible further increases in Fed rates this 2017, remain on a depreciation mode, the FMIC and UA&P said in the report.

Earlier, other private financial institutions forecast the peso to weaken to a range of P50:$1 to P52:$1 toward the end of the year, with the most pessimistic view seeing a scenario of worsening risk sentiment in case of a hardline trade stance between China and the United States.

The government has an exchange rate assumption of P48 to P50 per US dollar in 2017 to 2018.

The Philippine peso last touched the P50:$1 mark on Thursday last week as the market refocused on the US after Federal Reserve Chair Janet Yellen expressed a positive view of the US economy.